2026-05-02 22:02:29
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Today at a glance:
📱Apple: The Ternus Setup
☁️ Microsoft: The AI Bottleneck
🕶️ Meta: CapEx Spooks Wall Street
📱 Samsung: AI Chip Profits Explode
💊 Eli Lilly: GLP-1 Volume Engine Roars
💳 Visa: Fastest Growth Since 2022
💳 Mastercard: Cross-Border Cracks Show
⏳ AbbVie: Skyrizi and Rinvoq Deliver
🥤 Coca-Cola: Affordability Momentum
🧬 AstraZeneca: Oncology Carries Again
🦠 Merck: Bridge Drugs Show Traction
🔬 KLA: Demand Visibility Extends
📶 T-Mobile US: Accounts Over Lines
📡 Verizon: Schulman's Early Win
🧬 Amgen: Growth Outrun Patent Cliff
🛩️ Airbus: Engine Shortage Bites
📲 Qualcomm: Data Center Lights Up
💾 Sandisk: Memory Trade
🏝️ Booking: Middle East Cuts the Cycle
🎧 Spotify: Guidance Hits the Skip Button
💡 Cadence: Hexagon Mutes the AI Tailwind
📦 UPS: Transition Quarter
🏨 Hilton: US Demand Snaps Back
🪶 Robinhood: Crypto Drag, Prediction Surge
🍪 Mondelez: Cocoa Cost Hangover Lingers
🚗 GM: Iran Cost Spike
🚙 Ford: One-Time Boost Lifts Guide
☕️ Starbucks: The Turn Arrives
🌯 Chipotle: Comps Turn Positive Again
👾 Roblox: Safety Hits New Users Growth
🏦 SoFi: Strong Quarter Wrong Reaction
☁️ Atlassian: Cloud Reaccelerates Hard
⚡ Rivian: R2 Production Begins
🦷 Align: Volume Holds But US Softens
🍕 Domino’s: Macro Bites Into Comps
📦 Etsy: Marketplace Returns to Growth
🩺 Teladoc: BetterHelp Insurance Scales
Apple's Q2 revenue rose 17% Y/Y to $111.2 billion ($1.6 billion beat) and adjusted EPS was $2.01 ($0.07 beat). These were March quarter records despite supply constraints.
iPhone revenue grew 22% to $57.0 billion.
Services accelerated 16% to a record $31.0 billion.
China rebounded 28% to $20.5 billion.
As we covered last week, CEO Tim Cook will step down on September 1, with hardware chief John Ternus taking over.
Two structural shifts arrived alongside the print:
First, Apple ended its "net cash neutral" capital return policy. It was a 2018 pledge to return every excess dollar to shareholders until cash on hand matched debt. That commitment shrank Apple's net cash from $151 billion in 2018 to $62 billion today. Going forward, Apple will manage cash and debt independently and will no longer be obligated to return excess cash. The board still authorized $100 billion in fresh buybacks and a 4% dividend hike, but Q2 buybacks were cut in half despite free cash flow growing 28% Y/Y, signaling Apple wants to deploy its cash differently for the first time in years.
Second, R&D spending jumped 34% Y/Y. Historically, Apple has run lean on R&D, and the surge suggests the company might be ready to ramp up its spending.
Cook said memory costs will be “significantly higher” in Q3 (June quarter) and worsening beyond, a growing margin headwind. He didn’t commit to whether Apple will raise prices. Mac supply constraints (Mac Mini, Mac Studio, MacBook Neo) are expected to last “several months.” Despite all that, Apple guided Q3 revenue growth to 14%–17%, well above the ~9% consensus.
The setup for the Ternus era is becoming clearer. Apple has a record installed base of 2.5+ billion devices, a balance sheet with more flexibility, and a growing need to catch up in AI. Ending the net-cash-neutral policy gives the company more room to maneuver. The obvious question: is Apple preparing to deploy more capital toward AI, M&A, or a broader product reset?
The next iPhone cycle may reset expectations, but only if the Gemini-powered Siri overhaul convinces users that Apple’s AI gap is finally closing.
Microsoft’s quarter was strong, but the AI story is shifting from demand to deployment. Q3 revenue rose 18% Y/Y to $82.9 billion ($1.5 billion beat), and GAAP EPS was $4.27 ($0.22 beat).
Azure grew 39% Y/Y in constant currency, narrowly ahead of consensus.
The AI business reached $37 billion in ARR, up 123% Y/Y.
Copilot paid users rose to 20 million, still only ~4% of Microsoft’s 450+ million paid M365 commercial seats.
OpenAI stake: Unlike Alphabet and Amazon, Microsoft didn’t show a massive “other income” windfall from its private equity bets this quarter. OpenAI’s historic $122 billion round valuing the company at $852 billion closed too late to be booked in the March quarter. This means Microsoft’s 27% stake is due for a massive upward adjustment that will likely distort GAAP net income in the June quarter, similar to the “Anthropic bump” Alphabet and Amazon just booked.
The CapEx story is the dominant narrative. Q3 CapEx was $31.9 billion, 8% below projections due to timing, not lower ambition. Management also disclosed a ~$190 billion CapEx outlook for calendar 2026, including $25 billion tied to higher component pricing. The implied ramp is steep, raising a simple question: Can Microsoft turn spending into usable capacity fast enough?
Two strategic shifts occurred this quarter.
Microsoft and OpenAI signed a revised agreement that ends OpenAI's revenue-share payment to Microsoft after 2030, in exchange for extending Microsoft's royalty-free access to OpenAI's frontier models through 2032. It resolves months of tense negotiations that had led OpenAI to consider antitrust action.
CEO Satya Nadella signaled a structural pricing model shift: per-seat licensing is migrating toward “per user and usage”, with GitHub Copilot already transitioning. This could be a boon for monetization.
The company is also adapting its organization. Hood flagged ~$900 million in Q4 one-time costs from a voluntary retirement program covering ~7% of US-based employees.
Microsoft guided Q4 revenue growth of 13–15%, with Azure expected at 39–40% in constant currency. The contrast with cloud peers matters: AWS and Google Cloud both reported stronger acceleration this week, so at face value, it makes Microsoft look like an AI laggard.
The nuance lies in capacity. Nadella and Hood were explicit: demand for AI and cloud services continues to exceed supply. Microsoft appears sold out in several key regions, so Azure’s ~40% growth may be less a demand ceiling than a physical ceiling. The company can’t plug in GPUs and open data centers fast enough. That’s the AI Power Grid problem.
The bull case remains intact. Microsoft has $627 billion in remaining performance obligations, nearly doubling Y/Y. But the next phase depends on execution: converting backlog into revenue, bringing capacity online, and proving that AI monetization can outpace the infrastructure bill.
2026-05-01 20:03:58
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Three months ago, Amazon committed $200 billion in CapEx to bankroll the AI gold rush. Now AWS is selling the gold itself.
Amazon’s OpenAI deal is no longer just a financing headline. It is becoming an AWS product roadmap. OpenAI models are landing on Bedrock. Codex is moving into the AWS developer workflow. And Bedrock Managed Agents, powered by OpenAI, are designed to run production-scale agents directly on Amazon’s infrastructure.
That matters because agentic AI changes the cloud equation. Training models is one workload. Running millions of persistent agents with memory, tools, orchestration, and real-time reasoning is another.
Jassy framed the demand shift clearly:
“AI is commonly seen as a GPU story, but the rise of agentic workloads, real-time reasoning, code generation, learning, and multi-step task orchestration is driving massive CPU demand as well.”
Amazon says its chips business has topped a $20 billion annual revenue run rate, including Graviton, Trainium, and Nitro. In other words, AWS is moving up the stack with agents and down the stack with custom chips.
Now let’s see what stood out this quarter.
Today at a glance:
Amazon Q1 FY26.
AWS moves up the stack.
Key quotes from the call.
What to watch moving forward.
Revenue rose +17% Y/Y to $181.5 billion ($4.3 billion beat).
Gross margin was 52% (+1pp Y/Y).
Operating margin was 13% (+1pp Y/Y).
AWS: 38% margin (-2pp Y/Y).
North America: 8% margin (+2pp Y/Y).
International: 4% margin (+1pp Y/Y).
Net profit included a $16.8 billion non-operating gain from the valuation markup of Anthropic. This was triggered by the $30 billion Series G round in February, which established a new valuation benchmark of $380 billion. Amazon recently doubled down on its investment as we covered here.
Operating cash flow TTM was $148.5 billion (+30% Y/Y).
Free cash flow TTM was $1.2 billion (-95% Y/Y), driven by the operating cash flow growth, offset by a 67% rise in Capex to $147.3 billion.
Cash, cash equivalent, and marketable securities: $143 billion.
Long-term debt: $119 billion.
Revenue +16% to 19% Y/Y.
Operating income ~$22 billion or +15% Y/Y in the mid-range.
☁️ AWS accelerates: AWS revenue grew 28% Y/Y to $37.6 billion, its fastest growth in 15 quarters and a clear step-up from 24% last quarter. Operating income reached $14.2 billion, implying a nearly 38% margin, while Amazon’s chips business topped a $20 billion revenue run rate (annualized) and is growing triple digits. AWS is finally showing the AI acceleration investors were waiting for.
💵 The AI bill comes due: Free cash flow collapsed to just $1 billion over the past 12 months, down from $26 billion a year ago, as Amazon doubled down on AI infrastructure. It will stay that way as management still expects roughly $200 billion of CapEx in 2026, mostly tied to AWS, AI, chips, robotics, and satellites. Jassy’s message is simple: near-term cash flow takes the hit, but these assets should monetize for decades. It’s still ‘Day 1’ after all.
📦 Retail is still compounding quietly: North America revenue grew 12% to $104.1 billion, with the operating margin for the region improving to 8%. Worldwide paid units grew 15%, the fastest pace since the COVID lockdown era, and Amazon has already delivered more than 1 billion same-day or overnight items in 2026.
📢 Advertising keeps climbing: Advertising revenue accelerated 24% Y/Y to $17.2 billion, pushing the business to $72 billion in revenue in the trailing 12 months. This remains one of Amazon’s cleanest margin levers, benefiting from sponsored ads, video ads, and Prime Video monetization. The more Amazon grows retail volume and Prime engagement, the larger the ad flywheel gets.
🔮 Guidance says growth first, margins second: Q2 guidance calls for revenue to grow 16% to 19% Y/Y, with operating income rising 15% in the mid-range. It reflects the strong demand, but also the continued pressure from new bets and infrastructure spending.
Amazon is moving up the stack to compete for the enterprise seat. With agents, Amazon wants AWS to own the workflow layer.
Amazon Quick: This is the front-end service. It’s a unified AI workspace for Business Intelligence, research, and task automation. At $20/user/month, it is a direct, cheaper alternative to Microsoft’s Copilot.
Connect Suite: Think of Connect as the operational engine. Amazon has expanded Connect from a contact center tool into four agentic pillars: Customer, Decisions, Talent, and Health.
By bundling these agentic services into existing AWS accounts, Jassy wants to make AWS the operational OS of the company, significantly raising switching costs and driving high-margin SaaS revenue.
As of this week, the latest OpenAI frontier models and Codex are officially in limited preview on Amazon Bedrock. OpenAI has committed to spending $100 billion on AWS over eight years and using 2 gigawatts of power specifically for Amazon’s Trainium chips.
Codex integration: Bringing Codex (with its 4 million weekly users) into the AWS environment allows developers to build and deploy agents without ever leaving the Amazon ecosystem.
Bedrock Managed Agents: This service provides a managed harness for OpenAI models to handle memory, tool orchestration, and long-running tasks. By providing the orchestration layer, Amazon ensures the business logic stays within the AWS perimeter.
Amazon wants to become the Switzerland of enterprise AI. By hosting OpenAI alongside Anthropic and Meta, Jassy is ensuring that no matter which model wins, the infrastructure, security, and data reside on AWS.
Check out the earnings call transcript on Fiscal.ai here.
“If our chips business was a standalone business and sold chips produced this year to AWS and other third parties as other leading chip companies do, our annual revenue run rate would be $50 billion. As best as we can tell, our custom silicon business is now one of the top three data center chip businesses in the world.”
A $50 billion standalone run rate would place Amazon's silicon arm in elite company — behind only NVIDIA and Broadcom in data center chip revenue. The $225 billion Trainium backlog, with Trainium2 sold out and Trainium3 nearly fully subscribed, is what gives Jassy room to speak with such confidence. A decade of vertical integration is now the moat that makes Bedrock price-competitive against pure NVIDIA stacks.
“I think the future of using these models is a stateful model, a stateful API. [...] The Bedrock managed agents that we collaborated with and invented with OpenAI [...] I think that is the future of how these agents are going to be built. It is something that nobody else has.”
Stateless inference is a commodity. Stateful runtime is a platform. Jassy is staking the next phase of Bedrock on the bet that enterprise AI will live inside persistent, multi-step agent sessions — and that running those sessions inside AWS will be stickier than swapping models behind a chatbot. If he's right, OpenAI on Bedrock is less about access to GPT-5 and more about who owns the agent runtime.
“One of the interesting things that we see right now with the change in price and supply on things like memory is that it is a further impetus pushing companies who have on-premises infrastructure into the cloud. [...] We have seen a number of conversations we have been having with enterprises for many months—where it has just been slower in getting the transformation plan to move to the cloud—accelerate rapidly just because we have a lot more supply than what others have.”
The memory squeeze is doing AWS a favor. Growth accelerated to its fastest pace in 15 quarters — and one underrated reason is that hyperscalers got priority allocation from suppliers while on-prem buyers were left waiting. A supply shock is converting wait-and-see migration plans into signed contracts.
“If you look at one of our services, we swapped out the engine of the service while we were also running the service full tilt. Normally, that would have taken 40 or 50 people about a year to do. We took five really smart, AI-forward-thinking people building on agentic coding tools, and those five people rebuilt it in 65 days.”
That ratio explains Amazon’s broader efficiency push in plain English: more software shipped with fewer engineers. It explains Project Dawn's 30,000 corporate layoffs.
Total cloud infrastructure market spending grew by 35% Y/Y to $129 billion in Q1 2026, the ninth consecutive quarter of accelerating growth. Synergy Research Group estimates it was the fastest growth since 2021.
AWS maintained its leading 28% market share, compared to 21% for Microsoft Azure and 14% for Google Cloud.
All hyperscalers remain supply-constrained, so I try to refrain from analyzing the quarter-to-quarter changes too closely. But it’s hard not to notice a clear inflection point for Google Cloud (with TPUs playing a role) and impressive acceleration for AWS at this scale (boosted by Trainium), while Azure growth has plateaued.
Jassy disclosed that the custom silicon portfolio (Graviton, Trainium, Nitro) has reached a $20 billion annual revenue run rate (or $50 billion if AWS were counted as a customer).
Triple-digit growth: If this trajectory holds, the chips business could approach a $25–$30 billion run rate by year-end.
Meta Catalyst: Meta’s recent multibillion-dollar deal for tens of millions of Graviton5 cores (CPUs) validates the scale. While Meta is building its own chips (MTIA), its reliance on Graviton for general-purpose compute shows that Amazon’s vertical integration is a structural cost advantage Meta can’t ignore.
NVIDIA pricing power: As Trainium3 (the new 3nm chip) becomes fully subscribed, AWS can offer AI training at a 30-40% lower cost than NVIDIA-based instances. If Trainium3 delivers the promised price-performance advantage, AWS can pressure NVIDIA pricing inside its own ecosystem.
Jeff Bezos famously said, “Your margin is my opportunity.” This playbook can apply to the chip business, as most Fortune 500 companies optimize their cost per token.
In Q1 2026, the leading hyperscalers (Google, Microsoft, dAmazon, Meta) grew their trailing-12-month operating cash flow by 30% to $617 billion.
This represents the cash engine they can tap to fund the AI CapEx ramp without leaning on leverage. Amazon has even more flexibility because it continues to avoid stock buybacks and dividend payments.
The CapEx ramp is likely to keep absorbing more of that cash flow in the coming quarters, compressing free cash flow toward zero.
To be sure, that will spook some investors. But the rising backlogs and untapped opportunities suggest the bigger mistake would be failing to seize the moment.
Amazon is spending like crazy, but the spend is not random. AWS is building the stack for enterprise AI: custom chips underneath, Bedrock as the model layer, and managed agents on top. The free cash flow hit is real, but so is the strategic logic.
That’s it for today!
Stay healthy and invest on!
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Disclosure: I am long AMZN, GOOG, and META in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-04-30 10:16:59
Welcome to the Premium edition of How They Make Money.
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Alphabet plans to invest up to $40 billion in the company: $10 billion upfront, $30 billion more tied to milestones, and 5 gigawatts of computing capacity over five years. This deal was struck at a $350 billion valuation, a fraction of the $1 trillion secondary-market price Anthropic commanded this week.
Anthropic’s Claude may compete directly with Gemini, but Alphabet is backing it anyway because the infrastructure layer matters more than model loyalty.
Claude is becoming one of the defining products of the AI era, especially in coding, and Anthropic’s annualized revenue run rate reportedly jumped from $9 billion at the end of 2025 to $30 billion by April 2026. Yet Google is still leaning in, because every major winner in AI will need enormous compute, cloud, and networking capacity to operate at scale.
Google wants to win that layer. Q1 FY26 made the case.
Here’s what stood out this quarter.
Today at a glance:
Alphabet Q1 FY26.
The full-stack AI bet.
Key Insights from the call.
What to watch moving forward.
Alphabet just saw a $37.7 billion paper gain from its private equity investments, nearly as much as its entire operating profit for the quarter. If you have been reading this newsletter carefully, you were not surprised by this number (more on this in a second).
Revenue grew 22% Y/Y to $109.9 billion ($2.9 billion beat). In constant-currency, revenue grew 19% Y/Y.
🔎 Advertising: $77.3 billion (+16%).
Search: $60.4 billion (+19%).
YouTube ads: $9.9 billion (+11%).
Network: $7.0 billion (-4%).
📱 Subscriptions, platforms, and devices: $12.4 billion (+19%).
☁️ Cloud: $20.0 billion (+63%).
Margin trends:
Gross margin: 62% (+3pp Y/Y).
Operating margin: 36% (+2pp Y/Y).
Services (Advertising & Other): 45% (+3pp Y/Y).
Cloud: 33% (+15pp Y/Y).
Operating cash flow TTM was $174 billion (+32% Y/Y).
Free cash flow TTM was $64 billion (-47% Y/Y).
With CapEx now expected to reach ~$185 billion in FY26, most of Alphabet's operating cash flow will be plowed back into AI spending.
Cash, cash equivalents, and marketable securities: $126.8 billion.
Long-term debt: $77.5 billion.
2026-04-25 22:03:09
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
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📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🌐 IBM: Software Pivot & Mainframe Surge
🧴 P&G: Innovation Over Inflation
🧠 Lam Research: $140B Billion AI Upshift
💼 UnitedHealth: Retrenchment Rallies
⚡ GE Vernova: Supercycle Accelerates
💳 Amex: Spending Resiliency
⚙️ Texas Instruments: Hibernation Ends
📞 AT&T: Convergence Pivot
🛩️ Boeing: Operational Stabilization
🦾 Intuitive Surgical: Innovation Premium
🛰️ Lockheed Martin: Friction in the Ramp-Up
💊 Sanofi: Dupixent Engine
🧑💻 ServiceNow: AI Margin Pressure
💼 Moody’s: Record Issuance
🛩️ United Airlines: Flying Into a Headwind
🛩️ Southwest: Turbulence in the Outlook
🏡 Appfolio: Agent Adoption Skyrockets
IBM delivered a solid Q1, reporting revenue growth of 9% Y/Y to $15.9 billion ($0.3 billion beat) and adjusted EPS of $1.91 ($0.10 beat). Despite the outperformance, shares tumbled more than 10% as management left full-year guidance unchanged. While the market wanted more, the underlying numbers show that the software-led strategy and AI initiatives are still gaining traction.
The z17 cycle remains a powerhouse, driving a 15% jump in Infrastructure revenue. The IBM Z mainframe unit alone surged 51%, a record quarter that debunked fears that AI upstarts would quickly cannibalize demand for legacy servers. The Software segment grew 11% Y/Y, led by a 16% increase in Data to $1.5 billion. Notably, Red Hat OpenShift ARR reached $2 billion, and the early close of the Confluent acquisition further bolsters IBM’s data-streaming arsenal.
Productivity is becoming a core part of the story. Internal AI tools are delivering 45% average productivity gains for IBM’s own developers, helping to expand operating margins by 140 basis points. Free cash flow hit $2.2 billion—the highest Q1 print in a decade. Crucially, the narrative on AI has shifted: IBM stopped reporting the standalone AI bookings dollar figure and instead reported a 30% generative AI penetration in its Consulting backlog.
Looking ahead, IBM reaffirmed its FY26 outlook of more than 5% revenue growth and a $1 billion Y/Y increase in free cash flow. The board also raised the quarterly dividend to $1.69, marking 31 consecutive years of increases. With the integration of Confluent and HashiCorp underway, IBM is betting that its Sovereign Core software and hybrid cloud governance will make it the indispensable foundation for regulated enterprises scaling AI.
P&G rebounded in Q3 FY26, reporting revenue growth of 7% Y/Y to $21.2 billion ($720 million beat) and core EPS of $1.59 ($0.03 beat). Organic sales growth slightly rebounded to 3%, a recovery from the stagnation seen last quarter. Crucially, this growth was earned through a healthy mix of a 2% increase in volume and 1% in pricing, signaling that consumers are responding well to P&G's strategy of pairing price hikes with meaningful product innovation.
The Beauty segment was the leading segment, with 11% revenue growth and organic sales jumping 7% behind successful product reformulations and new package sizes in North America and Europe. However, the war in Iran has triggered an estimated $150 million after-tax headwind for the remainder of the fiscal year due to rising energy and logistics costs. CFO Andre Schulten warned that if oil remains above $100 per barrel, the company could face a massive $1 billion hit in FY27, potentially leading to further price increases.
Despite the top-line beat, management noted that fiscal 2026 EPS will likely land toward the lower end of its $6.83–$7.09 guidance range. The company is intentionally absorbing short-term margin pressure—gross margins fell 1 point to 50%—to protect its demand creation budget. With all 10 product categories showing organic growth, P&G is betting that maintaining brand momentum through heavy marketing and R&D will outweigh the immediate sting of rising commodity costs.
2026-04-24 20:03:19
Welcome to the Free edition of How They Make Money.
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In case you missed it:
Tomorrow, we’ll break down 17 key reports for PRO members, including IBM's mixed quarter as AI reshapes its business and ServiceNow’s aggressive M&A push.
Today, the spotlight is on Tesla and Intel, two companies now tied together by Musk’s Terafab project. Here’s what their latest results revealed.
🚖 Tesla: $25 Billion AI Pivot
🏭 Intel: CPU Renaissance
🚀 SpaceX: Potential Cursor Acquisition
Tesla’s AI and robotics pivot got materially more expensive this quarter.
Management raised FY26 CapEx guidance to $25 billion, up sharply from $9 billion in FY25, to fund projects tied to AI training clusters, Terafab, and Optimus 3.
With the AI5 chip already taped out and a $3 billion dedicated research fab under construction at Giga Texas, Tesla is investing beyond vehicles and into the physical infrastructure behind its AI ambitions.
Revenue grew 16% Y/Y to $22.4 billion ($0.2 billion beat).
Gross margin reached 21% (+5pp Y/Y).
Operating margin improved to 4% (+2pp Y/Y).
Non-GAAP EPS was $0.41 ($0.06 beat).
Operating cash flow grew 17% Y/Y to $0.5 billion.
Free cash flow grew 117% Y/Y to $1.4 billion.
Tesla again withheld full-year guidance. Management continues to improve overall profitability over time, as AI, software, and fleet-based profits boost the existing hardware-related baseline.
🚘 Automotive held up: Automotive revenue grew 16% Y/Y, showing signs of life after a difficult 2025. Tesla delivered 358K vehicles in Q1, missing the 365K consensus. It was still 6% above last year’s soft comparison, when factory retooling and protests weighed on results. Some of that volatility may also reflect lingering distortion from the EV tax credit deadline, which pulled demand forward before its September 2025 expiration.
⚡️ Energy lumpiness: The Energy segment saw a 12% revenue decline as storage deployments fell to 8.8 GWh, down sharply sequentially. Management said the business remains inherently lumpy because results depend on customer deployment timing, but still expects FY26 deployments to exceed FY25.
🔌 Services and Other surge: Revenue in Services and Other jumped 42% Y/Y to $3.8 billion, helped by the Full Self-Driving (FSD) subscription moving from $8,000 for lifetime access to $99/month, plus record Supercharger usage. With FSD subscribers up 51% Y/Y to 1.28 million, Tesla is steadily turning its installed base into a higher-margin recurring revenue stream.
📈 Margin recovery with a catch: Gross margin climbed to 21%, but the improvement was heavily aided by non-recurring windfalls, including $230 million in Automotive warranty write-downs and $250 million in Energy tariff recognitions. The headline improvement looked encouraging, but these one-time items partly masked pressure from excess inventory and softer global demand.
🚧 The Hardware 3/4 operational burden: Musk said Hardware 3 lacks the memory bandwidth for future autonomy, pushing Tesla toward Hardware 4 and beyond. To manage the retrofit process, Tesla plans dedicated city-based retrofit centers and a separate v14 software update path for HW3. That expands the cost and complexity of supporting a massive legacy fleet while trying to move the platform forward.
🚖 Robotaxi rollout: Following the Austin launch, Tesla has officially expanded its unsupervised Robotaxi service to Houston and Dallas. The service is slated for a rapid multi-state expansion (targeting 12+ states by year-end). The bigger message was that Cybercab development remains on schedule for 2026. The risk is that regulatory approvals now matter as much as technical progress.
💰 Free cash flow warning: Tesla’s balance sheet grew to $44.7 billion in cash, a critical war chest given the road ahead. While Q1 produced a surprise $1.4 billion in positive free cash flow, management warned that the heavy $25 billion CapEx cycle will likely push FCF into negative territory for the remainder of 2026. This cash burn phase is the price of admission for the growth expected from Cybercab and Semi volume production in late 2026.
Bottom Line: Tesla is spending like a company that wants to own the full AI mobility stack, not just sell more cars. The quarter showed an auto business that is holding up, a services engine that is gaining quality, and a balance sheet still strong enough to fund the push. The trade-off is obvious: free cash flow could come under pressure as CapEx surges. But management is clearly choosing long-term platform control over near-term efficiency.
Intel is finally seeing the payoff from its reset, as AI inference and agentic workloads lift demand for CPUs, wafers, and advanced packaging.
While Intel missed the first GPU-led wave, surging demand for Xeon server processors helped drive a major revenue and adjusted EPS beat this quarter.
With a strategic role in the Terafab project and the repurchase of its Irish fabrication facility, Intel is repositioning its balance sheet to reclaim a larger role in global AI infrastructure.
Revenue grew 7% Y/Y to $13.6 billion ($1.2 billion beat).
Gross margin improved to 39% (+2pp Y/Y).
Operating margin was -23% (-21 pp Y/Y).
Non-GAAP EPS $0.29 ($0.28 beat).
Operating cash flow grew 35% Y/Y to $1.1 billion.
Free cash flow improved to an outflow of $2.0 billion.
Revenue ~$14.3 billion ($1.2 billion beat).
Non-GAAP EPS $0.20 ($0.12 beat).
🧠 CPU Renaissance: Intel’s Data Center and AI revenue rose 22% to $5.1 billion as inference and agentic workloads boosted demand for Xeon. As AI shifts from training giant models to serving real-world applications, the CPU is becoming more central to the data center stack again.
📉 Foundry momentum: Foundry revenue rose 16% to $5.4 billion, while Client Computing revenue was held back by supply constraints and a still-tight PC environment. The move toward higher-priced AI PCs helped support an adjusted gross margin of 41%. The bigger takeaway is that Intel now looks more constrained by supply than by demand.
🏭 Terafab strategic pivot: Intel is joining the Terafab project as a strategic partner, offering design and advanced packaging resources for the Austin-based facility. This partnership, alongside the US government’s 10% stake, secures Intel’s position at the heart of the Sovereign AI movement and strengthens the strategic case for its Foundry Services division.
💰 Balance sheet flex: Intel repurchased the 49% stake in its Fab 34 joint venture in Ireland for $14.2 billion, reclaiming full control of a strategic manufacturing asset. The move signals growing confidence in long-term demand and in Intel’s ability to fund its next phase from a stronger footing.
🚀 Guidance blowout: Intel guided Q2 revenue to $13.8 billion–$14.8 billion, well above expectations. The message was clear: demand is there. The next challenge is scaling production and packaging capacity fast enough to keep up.
Bottom Line: Intel is no longer just a turnaround story. It is becoming a capacity story. The quarter showed that Xeon, packaging, and foundry demand are all benefiting from the shift toward inference and agentic AI. The question now is less whether Intel is relevant and more whether it can scale supply fast enough to match the opportunity.
SpaceX is pushing deeper into AI. After its $250 billion merger with xAI in February, the company announced a major partnership this week with Cursor, a leader in vibe coding.
The structure is unusual. SpaceX has the option to acquire Cursor later this year for $60 billion, or pay $10 billion fee tied to the partnership if a full acquisition does not happen.
The timing of this deal suggests where Musk sees a gap in his AI strategy. Despite xAI’s massive valuation, Musk admitted last month that his chatbot, Grok, was “behind in coding” and needed a complete rebuild.
Cursor brings something xAI’s giant compute buildout still does not: a product developers already use at scale. This is not just about fixing Grok’s coding weakness. It is also about connecting compute to an app layer that already matters.
By partnering with Cursor, SpaceX gets a shortcut into one of the most valuable layers of the AI stack:
Compute play: Cursor has been constrained by limited processing power. SpaceX is solving this by giving them access to Colossus, a supercomputer powered by 200,000 NVIDIA GPUs (equivalent to a million H100s).
Talent pull: xAI has already hired two of Cursor’s senior engineering leads to report directly to Musk. A full acquisition would consolidate top coding talent under one roof.
Model leverage: Cursor relies on models from rivals today, but a deeper partnership could move more of that stack closer to xAI over time.
Data advantage: Cursor may hold one of the richest proprietary datasets on how developers interact with coding models in the wild, which could become valuable training fuel over time.
Cursor also has a reason to lean in. It depends on rival models today, leaving it exposed as the frontier labs push deeper into coding themselves.
The structure may also reflect timing. With SpaceX preparing for an IPO, a full acquisition now could complicate the story and force broader disclosure changes. A partnership-first approach gives Musk a way to lock Cursor closer to the ecosystem without pulling the trigger immediately.
Bottom Line: SpaceX is using its compute advantage to accelerate its AI push without committing to a full acquisition today. The Cursor deal helps close a product gap now while reinforcing a bigger idea for investors: SpaceX is becoming a hybrid of satellite platform, launch infrastructure, and AI optionality.
Stay tuned for our full breakdown of the company’s financials once the S-1 goes live in the coming months.
That’s it for today!
Stay healthy and invest on.
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Author’s Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization’s views.
Disclosure: I am long TSLA, GOOG, and NVDA in the App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
2026-04-22 01:36:27
Welcome to the Premium edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
As it turns 50, Apple is entering its most delicate transition since the iPhone.
Tim Cook inherited Steve Jobs’ creation in 2011 and transformed it into one of the most efficient profit machines in corporate history. In September, he will hand the reins to hardware chief John Ternus.
Now, Ternus must show that Apple can still invent what comes next.
Today at a glance:
📱 Apple After Tim Cook
🤝 Amazon + Anthropic Part Deux
For 15 years, Tim Cook’s biggest product wasn’t a device. It was Apple’s operational excellence. He inherited a company built on the creative gravity of Steve Jobs and transformed it into a disciplined, $4 trillion fortress.
Under Cook, Apple became a cash-printing machine. Revenue and profit roughly quadrupled, while the stock climbed nearly 20x, driven by buybacks and a higher multiple.
AirPods and the Apple Watch arrived under Cook, but his real legacy was turning Apple into a profit-maximizing engine through supply-chain excellence and high-margin Services. Cook improved the operations and maximized the terminal value of the iPhone era.
The transition to John Ternus suggests Apple wants its next chapter to be defined less by optimization and more by product ambition. Apple is elevating an operator rooted in hardware execution at the exact moment the company needs its next device story.
Cook isn’t leaving the building. He’ll transition to Executive Chairman to manage global policy and his high-stakes relationship with the Trump administration. However, the CEO office will now belong to a 25-year Apple veteran described as “Tim Jr.” in style but an engineer by trade.